INNOVATION MASTERCLASS:Part Three: Knowing when to expand your business from home can be vital, writes Ciarán Brennan.

MANY SUCCESSFUL entrepreneurs like to recall how they originally started off in a bedroom in their home or a spare room in their parents' house. The fact that many "bedroom businesses" went on to become national or international success stories, employing tens or hundreds of people, would suggest that a business run from home has a short shelf life.

So, is it advisable to start and run a business from home and can you run a business from home in the long-term?

"The correct answer is, it depends," says Brian O'Kane, author of Starting a Business in Ireland and managing director of Oak Tree press. He is also working with the Institute of Technology Tallaght's Synergy Centre.

"It depends on the kind of business you have. If you are a consultant and you are selling your time and expertise, and you have limited engagement with your customers, then yes it could work well. The customers don't care when you do the work, where you do the work and how you do it - they just want you to deliver on time at the agreed price."

The plethora of software products from a variety of providers today also enables home workers to easily manage emails, calendars, contact databases, and create documents and presentations. But O'Kane says that running a start-up from home usually only works in the short-term, particularly if the business grows and you want to expand.

"For lots of businesses, it is only a short-term thing. It is a way of saving costs. Working from home gives you flexibility and cuts out commuting time, but it has disadvantages as well in that your family is there. It can intrude into business. It doesn't create the right kind of image."

Starting or running a business from home can throw up a host of other issues, says Louise Fleming, assistant chief executive of Wicklow County Enterprise Board. "Obviously, if you are working from home and if you have a six-room house with one as an office, you can write off one sixth of heating, lighting, broadband and landline phone bills. A lot of people don't know that and don't do it," she says.

However, Fleming and O'Kane both warn that if you subsequently sell the house, you may be subject to a capital gains tax liability on a certain amount of any profits from that portion of the house that was deemed a workplace. Planning permission may also be necessary depending on the type of business you are planning to run from your home and Fleming advises you to check with your local county council to see if change-of-use permission is required before you start your enterprise. If it is, you may then also be subject to commercial rates for that part of the building.

The other major pitfall people need to watch for is that a business being run from the home is still a workplace and is subject to the same health and safety regulations as if you had 40,000 sq ft of manufacturing space, according to O'Kane. "You have to go through the same process of a risk assessment and a safety statement that you would do for a bigger organisation," he says.

Public liability insurance will also be necessary if customers or employees are visiting your house, says Fleming.

And then there's the whole issue of perception, image and portraying a level of professionalism, especially when dealing with large clients, a difficult job to pull off if your address is in a sprawling housing estate in the suburbs.

One way around that is by using a virtual office, a service provided by companies such as Regus or the Premgroup, says Fleming. A virtual office is an easy, cost-effective way of boosting your company image by having a prestigious business address and availing of our professional call handling and mail forwarding services. These companies will also provide fully serviced meeting rooms and conference rooms.

However, some companies expand so quickly that neither homes nor virtual offices meet their requirements. At that stage, they will need some kind of premises. O'Kane says that entrepreneurs should be very careful about leases and rental agreements. "One of things you need to look at in the early stages is your need for flexibility - flexibility in terms of the need to move on, or move out, or just walk away without any major financial penalties," he says. "One of the attractions of places like enterprise centres is that often they don't rent, they give you a licence. It is a different kind of contract, but essentially you are paying on a month-by-month basis. If you need a bigger space, you can give your notice and you only have that one month ahead that you are committed to. I have seen lots of businesses where they get caught after signing 10-year leases and they have found themselves 18 months in where they desperately need more space."

Location is also important. If there is no particular reason for locating in a city such as Dublin, start-ups would be advised to look at enterprise space in counties surrounding the city.

"We are finding that a lot of people move down to Wicklow," says Fleming. "The differences in costs are huge. Commercial rates would be about 30 per cent cheaper. The planning contribution, if you are looking to build, would be 40-50 per cent cheaper in Wicklow as well," she says.